Interest and investment in Near Field Communications (NFC)-based mobile payment systems have never been higher with issuing banks, credit card providers, wireless carriers, handset makers, NFC chipset and terminal providers, trusted service managers and retailers all announcing their commitment to “the mobile wallet”. Gartner points to NFC mobile commerce as at the peak of its hype cycle, but the hype has peaked multiple times in the past and what’s different this time is real investment from ISIS, the JV of AT&T, Verizon and T-Mobile, as well as the sheer number of NFC-enabled smart phones that are projected for early next year.  

With backing by companies including Google, Visa, MasterCard, American Express, Bank of America, AT&T, Orange, Verizon, T-Mobile, Amazon, and many others, the big question seems to be when and not if mobile payments via NFC-enabled smartphones will become commonplace.

According to Juniper Research, the rapid adoption of NFC services will bring NFC functionality to almost 300 million smartphones by 2014, driven in the near term by mobile network operators launching services in 20 “early adopter” countries before the end of 2012. 

So when will consumers embrace the concept of paying with a smartphone, and what role will smart technologies play in the proliferation of mobile wallets? What will be the key enablers to adoption?

According to recent surveys, security remains the primary barrier to broad consumer adoption of the mobile wallet. A global survey conducted by Accenture indicated that 70 percent of people believe mobile phone payments increase the risk of identity theft and fraud. 56 percent of consumers responding to a survey from UK-based mobile banking firm Montise said security issues would prevent their adoption of a mobile wallet, even when the technology becomes widely available. The message from consumers seems clear: The utility and convenience of mobile wallet must not be detrimental to user payment information security. 

 

And as smart technologies continue to shape features and functions of today’s smartphones, one technology that provides strong user security to mobile wallet based-payments, yet further enhances the ultimate convenience of transaction is the smart fingerprint sensor. Unlike a standard fingerprint sensor which provides a single function, fingerprint recognition, a smart fingerprint sensor combines strong embedded security with additional touch-powered features. On a smartphone, these features include touch based personalization, quick launch of applications or phone functions, touchpad-like menu and cursor navigation, as well as standards-based encryption and one time password capabilities. 

The real sweet spot for today’s smart sensor is the NFC-enabled smartphone, where the smart sensor not only strengthens security but greatly increases the speed and convenience of mobile payment transactions. It accomplishes this by reducing multiple steps into one simple user action.

A consumer who wants to make a purchase with a mobile wallet without a smart sensor would need to take the following time-consuming steps: 

By contrast, a mobile wallet with an integrated smart sensor reduces these six steps into one quick action for the user who has preselected a credit or debit card. With the single swipe of a finger across the smart sensor - the phone quickly awakens and authenticates the user via fingerprint recognition, automatically unlocks, provides the credit or debit card information of the user’s choice, and turns on the NFC transmitter to enable a contactless payment. A user then taps the phone on a payment terminal and the transaction is complete – and in a fraction of the time required on a phone without a smart sensor.

The user can also use the smart sensor to unlock the mobile wallet in order to choose among multiple credit or debit soft cards with one additional step. Also, because each finger has a unique fingerprint, a user can associate each finger with a different credit or debit card. In this way, a user can predetermine which card they want to “present” for a transaction by swiping the finger associated with that card. One swipe and one tap completes their purchase, and with their card of choice.

The first such biometrically-enabled NFC transaction in the U.S. recently took place in Richardson, Texas. The successful transaction was made possible via a Motorola ATRIX smartphone equipped with AuthenTec’s AES1750 smart fingerprint sensor and DeviceFidelity’s In2Pay microSD card based on NXP’s secure NFC solution. The quick, convenient and secure mobile payment was conducted when the phone’s user swiped a finger over the fingerprint sensor, authenticating him as the pre-enrolled account owner and quickly launching a credit card app. Following authentication the user simply tapped the ATRIX smartphone against a payment terminal to pay for dinner. 

NXP, AuthenTec and DeviceFidelity plan to collaborate further on additional, similar NFC-based mobile wallet designs to help enable broader proliferation of mobile payments in the U.S. and other regions.

So when will the rest of us be able to pay for dinner with our NFC-equipped smartphone?  It’s already happening in Japan, and field trials have been announced or are under way in major cities in the U.S., Canada, the U.K., Germany, France, The Netherlands, Italy, China, India, Korea, Australia, New Zealand and other locations. 

Japan has led the world in mobile wallet deployment through their Osaifu-Ketai, literally meaning "Wallet Mobile". In fact, Japan was home to the first NFC-equipped smartphones ten years ago when they were offered by NTT DOCOMO. 

To help address security concerns from mobile wallet users, NTT DOCOMO offered subscribers multiple mobile phone models that provide the enhanced security of a built-in smart fingerprint sensor. Users found fingerprint sensors to be a faster and more secure way to pay, allowing them to quickly pay for quick entrance and exit in turnstiles at train stations by swiping their finger across a smart sensor without even breaking stride.

Consumer confidence in mobile wallets has increased dramatically in Japan, and nearly 30 fingerprint-enabled phone models spanning more than 10 million NFC phones have been in use since their introduction in 2004. During this same time NFC infrastructure to support mobile payments has mushroomed to more than 500,000 payment terminals at retail locations, train and subway terminals, airports and vending machines throughout Japan. 

And though Japan has been a good incubator for adoption of fingerprint-enabled NFC mobile wallets, the value of combining mobile wallets with smart sensor technology shows even greater promise in the U.S. and elsewhere. Smart sensor-equipped mobile wallets will take convenience, speed and security a step further by linking users to payment rewards, location-based sales and promotions, coupon programs and other synchronized services that will greatly enhance the mobile wallet experience.